Most digital currencies, despite decentralization, are still heavily dependent on traditional banks. The need for ways to convert them into traditional money and vice versa, as well as the attendant risks for the participants in this process, became apparent when two crypto-business-friendly banks, Silvergate and Signature, collapsed in the United States. Events of this magnitude complicate the process of injecting investor funds into digital assets and raise the question of further interaction between the banking sector and the crypto world, at least within the United States as the central financial hub for the industry. The collapse of the Silvergate and Signature banks left thousands of crypto companies unable to quickly convert digital assets to fiat. We talk about the current situation of industry participants.
The United States is a capital leader with the world’s leading currency. It is unlikely that the leadership in the field of cryptocurrencies will shift anywhere from the United States. According to analysts of the ASTL investment project, the American authorities have no goal to close the channels for converting cryptocurrencies into fiat, and even more so to prohibit banks from dealing with crypto business. American regulators, first of all, want to achieve control over the crypto market, and not to prohibit it. “Why ban something when you can lead it and get your own benefit? In the US, they want to gain control over the so-called payment gateways in order to prevent money flows from going past or into the gray regulatory zone,” explains Konstantinas, CFO of our project. Sizovas.
Large crypto exchanges were able to become the very channel for converting real money into digital assets, largely thanks to partnerships with Silvergate and Signature banks. Both have developed their own payment services – Silvergate Exchange Network and Signet, respectively. They allowed clients of exchanges and other financial services related to crypto assets to make payments in dollars in real time around the clock.
Banking regulators have long been wary of cryptocurrencies. Among the main reasons are the instability of their exchange rate as a potential source of losses for investors, the movement of illegally acquired income and the opacity of reserves for crypto assets on exchanges. Now, regulators seem to be looking to mitigate the weak links in the US banking system, which have been identified, among other things, after the Silvergate and Signature episodes. The collapse of banks was not least influenced by the increase in interest rates, but the volatility of cryptocurrencies also played a role – the volume of deposits and the value of banks’ shares almost synchronously changed with the exchange rate of bitcoin and other cryptocurrencies.
Now the US authorities have announced the launch of the Banking Sector Emergency Facility (BTFP) to help the industry overcome the liquidity crisis. Loans for up to one year will be provided to banks secured by securities such as treasury bonds. This should relieve banks of the need to quickly sell these securities in the event of a crisis. According to JPMorgan analysts, under this program, the US Federal Reserve System (FRS) can inject up to $2 trillion into the American banking system. After that, investors expect an influx of additional capital into the stock and cryptocurrency markets, which will contribute to the growth of stocks, cryptocurrencies and all risky assets, Konstantinas Sizovas believes. Only the shares of the financial sector will sink, since any collapse in the banking system will inevitably lead to a chain reaction, the expert suggests.
With U.S. regulators apparently intent on reducing the share of crypto banking, crypto companies have already started looking for alternative banking partners in Switzerland or the UAE. It remains to be seen how the situation will affect the volume of investments in the crypto business and the experiments of large financial players with crypto assets.
Having said all of the above, investors are advised to take some time to think before making any investment. One of the legitimate forms of investment is, for example, the ASTL investment project, which allows investors to have the opportunity to directly invest fiat and cryptocurrency assets in a stable passive income that obviously exceeds inflationary expectations and is not subject to any sanctions, blocking and confiscation. The ASTL project is a simple and elegant solution for potential investors – an investment in the development of the real sector of a diversified portfolio of cryptocurrencies, with a fairly high ROI (up to 12% annually) with payments in stablecoin (USDT) and the possibility of a full return on investment through the subsequent sale of accrued ASTL tokens on leading crypto exchanges. Details can be found at https://astl.io.